Market Imperfections within the European Wheat Value Chain: The Case of France and the United Kingdom

Abstract

The focus of this paper is on the analysis of market imperfections in the French and U.K. wheat value chains. We used mark-up and mark-down models and stochastic frontier analysis to estimate the degree of market imperfections in two completely different wheat-to-bread chains for two stages/sectors—milling and baking. Our results reveal some degree of market imperfections within the input and output markets for both the milling and baking sectors in France and the United Kingdom. However, the abuse of bargaining power is especially pronounced in the input market for the second stage of wheat processing, particularly in the French baking sector. However, we did not observe the expected positive association between the degree of market imperfections and company size except for a group of middle, large, and very large companies within the millers’ input market. Small companies indicate considerably high values of “Lerner”/Lerner indices, suggesting a benefit from other sources of competitive advantage (such as quality, niche markets, etc.).